How governments and central banks are exploring use of CBDCs

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Central Bank Digital Currencies (CBDCs).Understanding CBDCs CBDCs are digital representations of a nation's fiat currency and are issued and regulated by the central bank. Unlike decentralized crypto assets like Bitcoin, CBDCs are under the direct control of the issuing authority. This allows them to maintain their role in monetary policy, currency stability, and financial regulation. Governments have various motivations for exploring CBDCs. One significant reason is the modernization of payment systems. Traditional cash transactions are giving way to digital alternatives, and CBDCs offer a secure and efficient means for central banks to oversee these transactions, thereby reducing reliance on physical cash.

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Distinguishing CBDCs from Bitcoin While both CBDCs and Bitcoins are digital and utilize blockchain technology, they have distinct differences. CBDCs operate on authorized, private blockchains, whereas Bitcoin operates on a permissionless, public Blockchain. CBDCs are centralized and regulated by the issuing central bank, ensuring control over monetary policy and regulatory compliance. In contrast, Bitcoin is a decentralized crypto asset that offers transactional privacy and is superior in terms of financial inclusion. Furthermore, the finite supply of 21 million Bitcoins could serve as a hedge against inflation, unlike CBDCs which can be digitally created as needed.What is the status of CBDCs